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cancellation (2)

Mortgage Debt Relief exiring, but you still may be able to exclude cancelled debt

Posted by Steven Angelil on December 6, 2012 at 7:45am

As always please call your CPA/Accountant or the IRS for detailed info. about your specific situation.  Here is the IRS publication that deals with cancelled debt.  One of the key things distressed sellers may want to look into is insolvency.

IRS for 4681 re: Cancelled Debt

Please contact me if you are a Broward county Florida resident who has questions about short sales.

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Debt Forgiveness Tax - not necessarily

Posted by Stephen B. McWilliam on December 27, 2009 at 6:30am
I continue to experience people, real estate practitioners included, that are under the impression that income tax must be paid on forgiven debt if the debt was not used to acquire their primary residence and as further defined pursuant to The Mortgage Forgiveness Debt Relief Act and Debt Cancellation of 2007.Long before this was enacted there was, and still is, an insolvency exclusion. Basically, if you owe more than you have in assets you are considered insolvent. Your accountant would file a IRS 1099C (“C” for Cancellation) for any 1099 debt that was forgiven. The debt that was forgiven will not be taxed.Borrowers should verify their insolvency status with their appropriate financial advisor (ie. enrolled accountant, CPA, or tax attorney).
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